Oil firms want to scrap rules forcing them to mix biofuel with petrol, farmers want to raise the biofuel quota

By Chris Arsenault

LONDON, Sept 18 (Thomson Reuters Foundation) - A bumper corn crop in the U.S. means now is the time to reduce government mandates on turning food into fuel, an agricultural economist said, amid a debate over bioenergy targets.

"I don't see the sense in favouring one market participant like biofuels over the people in the world who want to use these feed stocks for food," Dr Thomas Elam, a U.S.-based economist with FarmEcon LLC, said in an interview with the Thomson Reuters Foundation on Wednesday.

Initiated in 2005, the Renewable Fuel Standards Act (RFS) was designed to wean the U.S. off its dependence on foreign oil, while benefiting the environment by forcing petrol producers to include biofuels in their product. But today critics worry mandates for biofuels mean too much agricultural land is being used to produce ethanol for cars, rather than food for people.

In 2011, for example, the U.S. turned enough corn to feed 570 million people into fuel, reported Smarter Fuel Future, a lobby group opposing mandatory biofuels quotas.

"Now would be a good time to do away with RFS," Elam said. "They (biofuels producers) have all the incentives they need right now to produce all the biofuels they can," as prices for many key agricultural products are at their lowest levels since 2009. Oil prices remain around $95 per barrel, a high enough level to increase demand for alternative fuel sources without government intervention, he said.

Energy companies are mandated to include 14.4 billion gallons of biofuels into the petrol sold in the U.S. in 2014. That means about 9.7 percent of the petrol pumped into the average car comes from biofuels.

Bob Dinneen, CEO of the Renewable Fuels Association, a lobby group, supports rules mandating the use of biofuels.

"The renewable fuel standard is helping our nation move away from fossil fuels and towards a renewable energy future, creating jobs in rural America and lowering the price of gasoline," Dinneen said in an interview.

Biofuels producers are not responsible for driving up the costs of food, he said.

"We are about to harvest the largest corn crop in the history of the world. As the price of corn has fallen have food companies reduced their prices? No," he said in an interview.

"Only 15 percent of what you pay for food goes to the farmer, 85 percent goes to marketing, transport, packing and refrigeration. All of those costs are tied to the price of oil. Most of the reason for food price inflation is based on the price of oil, not biofuels."

Major oil companies have been lobbying against RSF while farming interests, particularly corn producers, are pushing lawmakers and regulators to increase mandated quotas for biofuels.

Regulation is necessary, Dinneen said, because oil companies would not allow for serious competition from biofuels producers if they were not obligated to.

The environmental impacts of biofuels compared to traditional petroleum remain a source of debate among scientists.

The UN's Intergovernmental Panel on Climate Change believes that support for biofuels "needs to be considered on a case by case" basis as indirect emissions from some food-based fuels "can lead to greater total emissions than when using petroleum products". (Reporting By Chris Arsenault; editing by Tim Pearce)

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